The UK government has launched both a consultation and a call for evidence on the Capacity Market (CM), with the aim of strengthening the security of electricity supply while enabling decarbonisation. These two efforts are being run simultaneously by the Department for Energy Security and Net Zero, both opened on 15 October 2024 and scheduled to close at 11:59 pm on 10 December 2024.
Consultation: Proposals to maintain security of supply and enable decarbonisation
The consultation seeks views on proposed changes to the CM to maintain security of supply and support the decarbonisation of unabated gas plants. As the UK moves towards its goal of achieving clean power by 2030, reliance on renewable energy will increase, making flexible capacity critical to manage periods when renewable generation is low.
The government is investing in low-carbon flexible technologies, but during the transition period, they have stated that gas remains the most reliable source of flexibility. The proposed changes in the CM consultation aim to retain this flexibility while creating pathways for gas plants to decarbonise. Key proposals include:
- Making it easier for plants to access multi-year CM agreements, which provide revenue certainty and encourage investment in aging plants to extend their operating life, ensuring short-term electricity security.
- Requiring combustion power plants participating in the next CM auction to have credible decarbonisation plans, such as converting to hydrogen firing or carbon capture technologies.
- Introducing a pathway for unabated gas plants with multi-year agreements to transfer to the Dispatchable Power Agreement, enabling decarbonisation through carbon capture, usage, and storage (CCUS).
These changes are aimed at balancing the need for flexible capacity with the UK’s long-term decarbonisation goals. Reviews on the government consultation can be submitted by completing the online form.
Call for evidence: Long-term capacity market development
Along with the consultation, the government has issued a call for evidence to inform the long-term development of the CM. This process will explore further decarbonisation pathways for gas plants and help shape future capacity requirements. The evidence gathered will aid the development of additional pathways that allow unabated gas plants to exit the CM and transition to low-carbon technologies like CCUS.
Those interested in responding to the call for evidence can do so by completing the online form.
How does the Capacity Market work?
The Capacity Market scheme uses competitive auctions between technologies such as batteries and gas-fired generators, to secure the capacity needed to meet Great Britain’s peak electricity demands, safeguarding against the possibility of future blackouts. Since its introduction in 2014, the Capacity Market’s landscape has shifted with renewable energy now making up a significant proportion of Great Britain’s electricity generation system.
The consultation and call for evidence represent a critical opportunity for stakeholders to influence the future of the UK’s Capacity Market, ensuring it is fit for purpose in a decarbonising world.